Bitcoin Analysis: The results are in, $34,000 is a magnet

In yesterday’s analysis I pointed out that the price is likely to correct itself and asked whether it would make sense to sell your Bitcoin. Since then, shares have fallen $800 and this bearish scenario appears to be playing out as expected. Today is the time to update this scenario and look at Bitcoin’s long-term price position.

Bitcoin’s 4-hour chart

Yesterday, Bitcoin dropped significantly and even reached $35,600 at its low. However, a surge followed and the largest cryptocurrency is currently trading at around $36,500. The most important question that arises is of course to what extent this increase is sustainable.

To answer this question, it is first important to keep yesterday’s analysis in mind. Then we noticed that the volume indicator does not confirm the uptrend, which can be seen in the chart below. This is often a strong signal that 9 times out of 10 indicates a possible impending trend reversal where price levels like $34,000 could come back into view. Since this signal, nothing has changed and even the recent green 4-hour candles have no impact on the scenario outlined.

I think we can reach 37 thousand in the next few hours, just above the green line of the indicator. This line represents the 50 Simple Moving Average (SMA) and on the 4-hour chart it means that this indicator adds up the last 50 4-hour prices and calculates the average. The resulting line often acts as support during bullish periods (as clearly seen in the price action in early November) and as resistance during periods of trend changes.

So a small spike at the top that will lead to the story that the price will rise much faster, after which Bitcoin will cool down and then drop to $34,000. A scenario that seems more likely to me at the moment.

What will the price of Bitcoin do in the long term?

Earlier I discussed the 4-hour chart, which falls into the relatively short-term category. But what are the long-term prospects for Bitcoin? To assess this, we can look at both the Bitcoin chart and the dollar strength chart. There is a clear inverse relationship between the two. When the dollar strengthens, Bitcoin often falls and vice versa.

DXY clearly encountered resistance in the red box and fell. This once again confirms the inverse correlation mentioned above: Bitcoin actually rose during the same period. Now it appears that the price is rising slightly towards 105. I use the word “modest” here because that is how it appears on the weekly chart. However, this is still a big step forward in comparison. This will likely put Bitcoin in a downtrend in the coming weeks, which is in line with expectations.

If the price does not rise further, the dollar will move towards the green box. This is known to be beneficial for Bitcoin. So, by analyzing this chart we can conclude that the long-term uptrend is still intact even if the price falls in the short term.